decling shareprice gold and all that stuff, page-6

w1londongroup,

Sorry, you are completely wrong. Using the same scenario that you have used, if you had only gold bullion and needed to realise cash to meet mortgage payments, you would have to sell your bullion and by your logic the price of gold would fall.

Sounds like you are biased to bullion. That's fine, but you should acknowledge your bias.

If we were a stand-alone economy with no international trade and a nation wide margin call through property prices were to transpire, it would impact on everything. Even cash would be worth less (although this would be likely anyway with a reduction in AUD). This is a deflationary scenario. However we also know that we have a fiat currency system whereby cash and debt-based assets are inflated away to offset the impacts of credit contraction and thereby significantly increasing the nominal prices of assets such as gold bullion and gold stocks.

We are not a stand-alone economy. Quality companies with solid resources and good cash flows would not be impacted as you suggest. Yes, there could be short-term volatility but it doesn't change the fundamental nature of these businesses.

If you owned a gold mine privately and could produce the bullion and store it, why would you act differently compared to having only the bullion? Would you sell your mine for less than previously? If you were rational, you would not. A good mine is clearly superior to bullion as an investment. The bullion is superior as a store of value.

If we had a rapid reduction of liquidity in this country, international investors would step in and take advantage of that fact and support prices. In fact, many would seek shelter in both gold bullion and gold stocks.

I think you don't realise that gold stocks are paper titles to real assets and are not paper contracts. You are not alone, but I think that your misunderstanding is part of the reason why many quality gold producers are significantly undervalued.